SBA Loans

Get access to revolving funds when you need it most.

Ezra Cabrera

October 16, 2021

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Loan Amounts

$100,000 – 5,000,000


10 – 25 Years


5.25% – 7.75%


Less than 30 days
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SBA Loan

What is an SBA Loan?

What is an SBA Loan
An SBA Loan is a loan that is originated by private lenders and banks, but is guaranteed by the Small Business Administration. These loans usually have 10-year terms, unless real estate is involved, then the loan terms are typically for 25 years. Funds are directly given to the borrower from a lender, with a government guarantee. Bank and non-bank lenders offset their exposure or credit risk by utilizing an SBA loan program because of this government guarantee. It’s often misunderstood that the SBA lends directly to small businesses, however, the SBA only provides a guarantee, or insurance on the loan.

SBA Loan programs offer attractive rates and terms, but are notorious for having a long and document-intensive process. Because these are long term loans with guarantees, every dollar must be earmarked and the purpose of the funds must be documented at every step. This process, to identify clearly how the money will be spent, takes a lot of time. Making sure that a small business owner works with the right lender or loan broker is essential to having a smooth and efficient application and closing process.

Small business owners often prefer SBA business loans over traditional financing options because the nature of their company and their needs fit the SBA loan requirements. Especially with the ease of accessing information in today’s modern age, it is easy for small business owners to browse the Internet and learn about the different SBA loan programs and compare different loan products offered by different lenders. Some online resources offer an SBA loan calculator or other innovative tools to teach business owners how to apply for an SBA loan or to understand their qualifications or restrictions and compare the fit of different types of loans for their company. From learning about a first SBA startup loan or applying for additional SBA business loans to expand or develop an existing small business, there is plenty of information available to learn about and find an SBA loan program and lender that will work for any small business.

SBA Loans types

What are the different types of SBA Loans?

SBA 7(a) Loan

The SBA 7(a) Loan program is the most commonly used SBA loan program by small businesses. The SBA 7(a) Loan program is as popular as it is because it can be used for a variety of different reasons and has less restrictions and more flexibility than other SBA Programs. Small businesses can utilize the SBA 7(a) program to purchase or acquire a new business, purchase or refinance equipment, for partner buyouts, leasehold improvements, refinancing commercial property, and for general working capital. SBA7(a) Loans range from $100,000 to $5,000,000 with interest rates from Prime + 1% to 2.75% and small business owners can usually apply for SBA loans through typical banks, credit unions, or other specialized lenders.

SBA 504 Loan

The SBA 504 Loan program is a real estate-focused program that provides small businesses with low interest rates and long repayment terms. This program is utilized by small business owners that are looking to expand their current office, purchase a new building, acquire land for development, and for ground-up construction projects. SBA 504 Loans typically range from $500,000 to $20,000,000 with rates between 4.92% to 5.22%.

SBA Disaster Loan

SBA Disaster Loans are part of the SBA Disaster Relief programs which are designed to help small businesses that have experienced damage or hardship due to a natural disaster. SBA Disaster Loans can be used for leasehold improvements, to repair damage to real estate, and to replace machinery and equipment. In order to qualify for an SBA Disaster Loan, a small business must have experienced damage during a natural disaster and must be located in a declared disaster area.

SBA Express Loan

SBA Express Loans are small business loans originated by SBA-approved lenders for up to $350,000. SBA Express Loans have an expedited process due to the small size of the loan and the guarantee offered by the SBA. A major benefit of SBA Express loans is that collateral is not a requirement and small business owners can use the money for virtually any business purpose. In order to get approved by the SBA, an applicant must have strong personal credit and cash flow. Unlike the SBA 7(a) Loan Program, SBA Express Loans can be closed and funded within as few as 14 days. SBA Express Loans have rates between Prime + 4.5% to 6.5% and businesses can borrow up to $350,000.

SBA Microloan Program

The SBA Microloan Program offers SBA loans to small businesses that are seeking less than $50,000. SBA Microloans can be used for machinery and equipment, furniture or fixtures, working capital, and inventory or supplies. Through the SBA Microloan program, businesses can borrow from $500 to $50,000 with rates ranging from 8% to 13%.
SBA 7(a) Loan AmountsSBA 7(a) Loan TermsSBA 7(a) Loan Rates
$100,000 to $5,000,0007 to 25 yearsPrime + 1% to 2.75%
SBA 504 Loan AmountsSBA 504 Loan TermsSBA 504 Loan Rates
$500,000 to $20,000,00010 to 30 years4.92% to 5.22%
SBA Disaster Loan AmountsSBA Disaster Loan TermsSBA Disaster Loan Rates
Up to $2,000,000Up to 30 years4% to 8%
SBA Express Loan AmountsSBA Express Loan Terms SBA Express Loan Rates
Up to $350,000 7 to 35 yearsPrime + 4.5% to 6.5%
SBA Microloan AmountsSBA Microloan TermsSBA Microloan Rates
$500 to $50,000 Up to 6 years8% to 13%
how SBA Loans Work

How do SBA Loans Work?

How do SBA Loans Work
For a small business owner, SBA Loans are not that different compared to other small businesses loans. SBA small business loans are issued by banks or other lenders to small business owners with up to 85% of the loan being be guaranteed by the SBA. While this guarantee doesn’t change much for the borrowing business, the guarantee entices lenders to offer SBA business loans to more small business owners and encourages lenders to offer more of these types of loans. The reason that the SBA was created in the first place is to help and support U.S. business owners. The first step for business owners that are considering SBA loans is to find the appropriate SBA-approved lender that can offer the right product and that it fits the needs of their business. Different lenders might be more suitable to offer different loan programs, and with all of the online resources available for small business owners there are often multiple lenders and programs to consider. By exploring all of the different options, small business owners can find a lender that is compatible.

Finding the right SBA-approved lender is important in guaranteeing a smooth process from start to finish. Unlike other traditional loans, the documentation and financial information required for authorization in the SBA loan process is demanding, and sometimes the process to determine eligibility can take some time, which can frustrate some small business owners. This means that finding an educated lender that works well and can communicate makes for a much easier process for business owners. Especially if a business owner is new to SBA loans or small business loans in general, they will want to find a lender that can help them learn the ins and outs of the different programs available. The SBA itself, as well as their partners, also offer courses and training programs to help small business owners put together a comprehensive plan that will aid in the application process and throughout the SBA loan program.

Small business owners often ask how to apply for a SBA loan or how to qualify for an SBA loan – because these are longer term loans, there is a deeper background and credit check compared to other small business loans. When looking into how to get an SBA loan, business owners need to gather documentation and evidence that their small business will be alive and healthy for over 10 years and will need to show collateral that can secure the loan. Business owners will also need to provide their personal identification, their business certificate or license, proof that they are the owner of the small business, the business financials and any current financial projects, profits statements, loss statements, tax returns for the last two years for the small business and for the business owner’s personal taxes, and any history of past loan decisions or applications. If a small business can provide all of this information and can demonstrate strong health, has a good borrowing history, can demonstrate good credit, present a profitable business plan and show that they are making money and will be able to pay off the loan, then they should be ready to apply for an SBA Loan.

What can an SBA Loan be used for?

One of the major characteristics of SBA Loans that make these loan programs desirable for small business owners is the flexibility offered while utilizing the funds. From investment capital and disaster relief to loans for startup or expansion, small business owners use SBA Loans for a variety of functions. For example, imagine a small business that has some debt, but the owner wants to expand in order to supply more customers and pick up more clients to earn more revenue. These kinds of short-term debts, like money owed to vendors or credit card debt, for example, shouldn’t have to limit the capabilities to grow a business. In these types of situations, small business owners often utilize SBA loan programs to refinance their debts and invest into their business. By refinancing the money over ten years with an SBA loan, small businesses have the opportunity to adjust their payments and make their operating costs more manageable over time.
What can an SBA Loan be used for
Because of the variety of SBA loan programs and the range of uses for the different loan products, small business owners use SBA small business loans for all sorts of business expenses. Some of the most popular uses for SBA loans for small businesses are acquisition financing, debt consolidation, equipment refinancing, working capital, business expansion, or even for partner buyouts.

SBA Acquisition Financing

SBA Loans are frequently used for business acquisition financing. Through SBA Loan programs you can purchase a new company or a competitor. For acquisition financing the SBA requires that there is a minimum of 10% equity being used for the acquisition. Although this is the case, most SBA lenders will require closer to 15-20% of equity to be used for the business acquisition financing.

SBA Debt Consolidation Loan

SBA Loans are frequently used by small business owners for business acquisition financing. Through SBA Loan programs, small business owners can purchase a new company, purchase a competitor, or acquire other existing companies. For acquisition financing, the SBA requires that there is a minimum of 10% equity of the SBA loan funds that are being used specifically for the acquisition. Although this is the requirement from the SBA itself, most SBA lenders will require closer to 15-20% of equity to be used for the business acquisition financing. Some lenders follow more strict guidelines compared to others, which makes choosing a lender that’s a good fit with the small business crucial to an acquisition.

SBA Equipment Refinance Loan

Most small businesses have some sort of debt, and one of the most important decisions that small business owners face is how to handle the debt before it starts to pile up. Debt consolidation is one of the most common purposes for small businesses to utilize SBA loan programs. Small businesses, especially ones that have short-term debts, such as equipment loans or leases, lines of credit, truck loans, merchant cash advances, or other money owed, can refinance and stretch their debt payments over 10 years with an SBA loan. By using an SBA Loan program for debt consolidation, small businesses are able to dramatically reduce their monthly debt payments. This results in significantly more cash flow for day-to-day operations and makes managing debt much easier for small business owners.

SBA Working Capital Loan

SBA Loans are frequently used by small businesses for working capital when small business owners are looking for a permanent injection of cash. One barrier that a lot of small business owners experience is limited working capital. The SBA was created with the intention of providing support for small business owners, and one of the most common uses for SBA loan programs is to help small business owners by providing them with an influx of working capital. Traditional bank programs will require that term loans are used for specific purchases or to refinance existing debt, however, SBA Loan programs allow small business owners to inject the full loan amount into their bank accounts for future operations or immediate working capital needs.

SBA Business Expansion Loan

Another purpose that small businesses use SBA Loans for is business expansion. Expansion can help a small business accelerate growth plans, and an SBA loan can provide assistance for small businesses owners so they can execute their growth plans without the worry over having the cash flow to do so. By using an SBA loan to expand a small business, the business owner can: 1. Acquire additional businesses 2. Purchase or update equipment 3. Hire new employees 4. Open new locations; or 5. Purchase commercial real estate.

SBA Partner Buyout Loan

Using an SBA Loan to buy out an existing partner is a great way to use long term financing to own a larger percentage of the company. Many small business owners utilize SBA loans for partner buyout to gain stake in their company that they otherwise wouldn’t have been able to afford. Similar to some of the other reasons why small businesses would use an SBA Loan, having a 10-year term to utilize the funds enables some owners to buyout a partner and be able to sustain the payments in addition to the existing cash flow for the business.
SBA Loans benefits

Benefits of SBA Loans

Unlike traditional loan options, SBA loans are designed specifically for small businesses, which provides a benefit for small business owners that apply. The SBA directly targets small business owners for the SBA loan programs, providing flexibility and options that are helpful for small businesses. For example, SBA loans can be used for an array of expenses, the SBA goes so far as to say that funds from SBA loans can be used for “most” businesses purposes – which includes SBA startup loans, loans for expansion, equipment purchasing, working capital, inventory, SBA business loans, or SBA real estate loans.

One of the biggest benefits of SBA loans is that the loans are secured, which provides a major incentive for lenders to offer SBA loans to small business owners. SBA agencies guarantee a majority of the loan amount for the lender, which reduces their risk and allows them to continue supporting small business owners. This makes the likelihood of finding a lender and successfully applying for an SBA Loan higher, as the risk goes down for the lenders.

SBA Loans collateral

What type of collateral is used for SBA Loans?

One of the downfalls of SBA loan programs is that small businesses will often have to put up collateral to secure their loan. While this might be intimidating for some small business owners or first time SBA loan applicants, there are many different types of collateral available that can help to secure an SBA loan. Many of these types of collateral are things that are already ready and available just from operating a small business.

A wide range of collateral can be used to secure an SBA Loan. While different asset classes are considered, some will hold more value than others. Some of the types of collateral that can be used for SBA loans are: machinery and equipment; accounts receivable; inventory; commercial real estate; residential real estate; investment properties; and marketable securities.

Machinery and Equipment

Considered a hard asset, machinery and equipment are favorable assets for SBA lenders. By taking the make, model, year, and the condition of the equipment into consideration, an SBA lender will have the ability to assign a value to the equipment. One of the reasons that machinery and equipment are commonly used by small businesses owners for collateral to secure SBA loans is because these assets are already available and being used by the business.

For most SBA loans, the typical advance rates or loan-to-value (LTV) assigned to equipment and machinery is 60% of the forced liquidation value (FLV). This means that an SBA lender will provide availability based on what they would be able to sell the equipment for in the event of a default.

Accounts Receivable (A/R)

A/R, or accounts receivable, is money that is owed to a company after a sale has been made or services have been rendered to their clients. Basically, if a small business provides goods or services to their clients but often wait for the clients to make payments on invoices or for their contracts, the money owed to the small business can be used as collateral to secure an SBA loan.

For most SBA lenders, the A/R that a company has to offer is not as favorable as hard assets, like machinery or equipment. The typical loan-to-value (LTV) for A/R is 20% of the outstanding accounts receivable. This can vary based on the credit quality of the applying business’s clients, the payment terms that are offered, and the diversification of their client base. SBA lenders are often willing to carve out or release their security interest in accounts receivable. SBA Lenders will do this to enable a factoring company or an invoice financing lender to provide a revolving line of credit in addition to an SBA Loan.


Although inventory is a tangible asset that might hold value to an operating business, inventory is not always as valuable to an SBA Lender. The type of inventory, the ease of liquidation, and the location of the inventory will all play major roles in determining the advance rate or LTV that an SBA Lender will provide when using inventory to secure an SBA loan. For example, a company that manufactures their own jewelry might receive a 30% LTV from a lender while a steel manufacturer that holds raw steel as inventory might receive a 65% LTV. From a lender’s perspective, the faster and easier they could sell the inventory, the higher the liquidation value they will assign.

Commercial Real Estate

Commercial real estate, or CRE, is a hard asset for small businesses and a great form of collateral for an SBA Loan. Real estate is not as liquid as equipment, A/R, or inventory, but can will provide a stable asset for an SBA lender to lend against. Like machinery or equipment, small business owners often utilize real estate to secure SBA loans because the real estate is tied in with the function of the business.

Additionally, unlike asset-based lending, SBA loans that have commercial real estate pledged as collateral have a higher likelihood of being approved. Traditional commercial real estate lenders and banks will normally only provide the first lien mortgage on commercial real estate, however, this is not the case with SBA lenders. SBA Loans can be secured by a second lien on commercial real estate. For example, if a property’s appraised value is $1,000,000 and they have a bank real estate loan for $500,000, an SBA lender can still use the real estate as collateral. An SBA lender will use the remaining $500,000 of equity as collateral for an SBA Loan.

Residential Real Estate

Depending on the lender, residential and personal real estate may also be applied as collateral to help secure an SBA loan. However, for traditional loans, many commercial lenders will only allow commercial assets to be used as collateral for a commercial loan, and do not accept residential property.

With SBA lenders, residential real estate can be used for collateral to secure the SBA loan. In fact, under SBA guidelines, SBA lenders are required to take any available collateral to secure an SBA loan – another part of the incentive for lenders to offer SBA loans to small business owners. The ability for the SBA to use personal residences as collateral helps make SBA Loans more obtainable for more small business owners. Most home-owners have a bank mortgage in place, but similar to the commercial real estate example above, if there is available equity then the residential real estate can be used as collateral.

Investment Properties

Another type of collateral that can be used to secure an SBA loan for a small business is investment property. Business owners that invest in various types of investment properties have the ability to pledge those properties as collateral for an SBA Loan, if their lender will accept them. Whether the investment property is a shopping center, office building, apartment building, or single-family home, it might be eligible to be used as collateral.

Marketable Securities

One final type of collateral that small business owners can use to secure SBA loans are marketable securities. Marketable securities are liquid assets that can quickly be turned to cash. A few examples of marketable securities are publicly traded stocks, private or public bonds, and certificates of deposits (CDs). Like commercial real estate, marketable securities are typically used as ‘boot’ or extra collateral to help a borrower gain additional liquidity. Advance rates for securities tend to range from 50% to 95%, which is dependent on the type of security.

What documents are needed to get approved for an SBA Loan?

*The below forms are necessary to process an SBA Loan Application, but additional documentation will be required.

Downloadable SBA Forms

SBA 7(a) Loan Application Documents – SBA 504 Loan Application Documents – SBA Disaster Loan Application Documents – SBA Express Loan Application Documents – SBA Microloan Loan Application Documents

SBA Form 1919

SBA Form 1920

Profit and Loss Statements (prior 3 years)

Current Balance Sheet

Current A/R Aging Report

Current A/P Aging Report

Business Debt Schedule

Environmental Questionnaire

Complete Business Plan

2 Years of Business Projections

SBA Loan processing time

How long does the SBA Loan application take?

The application process for an SBA Loan is going to vary based on the SBA program being used and how organized the business owner’s financial information is. SBA Loans can take anywhere from as little as 14 days to as long as 6 months, but the delay normally comes from lack of information or when the needed information is not readily available on the business owner’s end. If the business owner is organized and has their financials organized, insurance documentation, tax returns, and other relevant business information on hand, the process can be much faster.

FAQ About SBA Loans

What is an SBA Loan?

An SBA Loan is a loan that is originated through private lenders and banks that is guaranteed by the Small Business Administration. SBA Loans have terms of 10 and 25 years and are used for an array of different reasons.

How long does the application process take for an SBA Loan?

The application process for an SBA Loan varies depending on both the type of SBA loan the business is applying for and how organized the businesses’ financial are. Working directly with a lender that specializes in SBA Loans will help expedite a long and document -intensive process.

How to use an SBA Loan?

SBA Loans are used for a wide range of different functions by businesses in a plethora of industries. Businesses use SBA Loans for Expansion, Debt Consolidation, Working Capital, Acquisitions, and Equipment Refinancing

How long does it take to get an SBA loan?

Obtaining an SBA loan requires an intensive document process and can take anywhere from 30 to 120 days depending on if the business is working with a bank or direct lender. Banks typically move slower, while private lenders that specialize in SBA loans can expedite the process to close in about 30 days. Each situation is different and is dependent on the dollar amount of the loan, the use of funds, and the terms.

Is collateral required for an SBA Loan?

There is a wide range of collateral that can be used to secure an SBA Loan. Some of the more common types of collateral used for SBA Loans include Equipment, Commercial Real Estate, Residential Real Estate, and Inventory.

What are the different SBA Loan options?

Although the SBA 7(a) loan and the SBA 504 Loan are the most common SBA Loans, there are 3 other SBA Loans. The SBA Disaster Loan, SBA Express Loan, and SBA Microloan Program all have different uses that businesses utilize.
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